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If you've paid to get a credit score from one of the credit agencies, how reliable is it? We run through the truth about credit scores.

I’ve just found out that my credit score has dropped – should I be worried? Right, hold on there for a second. Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist.
So, when you say your credit score has dropped – what exactly do you mean by that?

Well, I paid a credit reference agency to check my credit score and it's dropped. OK. So you went to one of the credit agencies – Equifax, Experian and Callcredit – and paid them a sum to get your 'credit score'. You'll get a score up to 600 from Equifax, up to 999 from Experian and up to five from Callcredit.

That's very common, and it's common to be confused about exactly what this is.

So I do get a score, but it's worthless? What you have to understand is this score doesn’t really mean that much. The first thing you need to appreciate is when you apply to a lender is that it will judge you based on three criteria.

So, the first thing to understand is that this score is based on incomplete information. The next thing to understand is different lenders are looking for different things, so they score you differently.

Just because one lender rejects you doesn’t mean another lender will do the same. The idea that this is all based on some simple score given to you by one of the credit reference agencies is false. At best, it's just an indicative guide to roughly how good or bad a risk you are.

In that case – why do they sell it to me? Well, the key word in what you’ve just said is ‘sell’. They sell it to you. Credit reference agencies used to make all their money from selling data to lenders. The idea was to help lenders predict your behaviour, which allowed them to assess whether or not you were a good person to lend to. They do that by deciding not just if you are a good or bad risk, but if you will be profitable or not.

Then some bright spark at the credit reference agencies realised they could generate a business called 'credit management'. It meant they could start to sell you all the other sorts of data and monitoring products for the first time and start making money from it. You ask why they sell it to you – well, it makes them money.

Does that mean it’s completely worthless and I should ignore it? No, I wouldn’t go that far. It's a loose indication of your rough creditworthiness, and certainly it's worth looking at the things they say are blemishes to see what you can do to improve your credit.
Where I think scoring doesn’t work is, for example, imagine you closed a credit card with a high credit limit that you'd had a long time, but didn't use any more. It's perfectly possible that your score would drop because a long relationship means it's a credit card that could give a good prediction of your behaviour.

But it also needs to be understood closing this would count as a positive for some lenders because you had less available credit.
The fact that your credit scorer has decided to reduce the score it gives you because you've cancelled that card doesn’t mean other lenders will do the same. Nor does it mean there's anything wrong.

OK – right, I understand. So what should I do to improve my credit? Well, it's important to think of this like a beauty parade. Just as everybody finds different people attractive – so do lenders.

There are general things you can do to 'rouge' up your credit appearance that make sense everywhere. As this guide's only 60 seconds long, I'm not going to go into that here. Instead, read the full Credit Scores guide.

It's very important to understand – this is art, not science.

What works for one lender won’t necessarily work for another – so there's no tried and tested right answer.

I've got no idea!!! I know what's on the report urgh and that only occurred by devine intervention!! never wanted to know my "score"
As long as there are no strange goings on y'know letters arriving that you don't understand, then I could feel top of the score board! I'm sure someone will burst my bubble one day!

Yes, lenders look for different things and have their own scoring methods. But very often we don't know what they're looking for until we jump into their swimming pool. We can at least assume that if they allow us to jump into their swimming pool in the first place we at least fulfil their initial criteria which I firmly believe to be the potential to make a profit from us as opposed to a loss.

Say for example a credit card company loves us to keep a balance so they can charge us interest (which one doesn't?) and bases limits on the amount of a regular payment relating that payment to a minimum payment. Then to possibly ensure limit increases we might keep a balance and make a payment of the same amount every month which is considerably higher than the minimum.

I agree it's an art form within which is an element of social psychology.

Actually, you don't have a credit score in the UK, you don’t have a credit rating, and there’s no such thing as a credit blacklist.

by MSE article”

About bloody time they came out and said this explicitly. In fact, that article says most of what I've been saying for the past few years (although I still believe they are worthless when people with defaults have excellent scores).

*vindicated*

Now can we make this a sticky?

Last edited by The Boss; 24-05-2014 at 8:01 AM.

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

Well, how interesting...wish I'd known all this yesterday as I've been bullied into paying for our credit scores even though both myself and my husbands credit reports (which we paid £2 each for) were perfect! We are hoping to buy our flat under the Bight to buy and are taking advice from the RTB Co-operative, for a month we've been at loggerheads over this damn credit score, as we've been refusing to sign up for something we don't need and are worried whether it's going to be difficult to cancel. My husband and I are both careful with money and are proud to say that we have NO debt whatsoever and avoid anything which tells you it's 'free for 30 days, cancel any time' don't trust them at all! But that's what we've had to do just to get this so called credit score and I'm not happy one bit after reading this!

The Right to buy Co-operative, they give advice on buying your Council/housing association property, find you a mortgage etc. Maybe bullying is a bit strong a word, but for the last few weeks I've been asked again and again for our credit score, which you can only get by signing up for something we don't want, I've argued that our credit reports are excellent which they are, so why do we have to have a score, just to be told 'that's what companies want' the score not the report!

on my credit report my only 'negative' is having no settled accounts, but they say a catalogue settled account doesn't count, so what on earth can i settle in order to remove this negative? I have a redundant RBS account, should i close that? Would that count as settled?

The Right to buy Co-operative, they give advice on buying your Council/housing association property, find you a mortgage etc. Maybe bullying is a bit strong a word, but for the last few weeks I've been asked again and again for our credit score, which you can only get by signing up for something we don't want, I've argued that our credit reports are excellent which they are, so why do we have to have a score, just to be told 'that's what companies want' the score not the report!

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

on my credit report my only 'negative' is having no settled accounts, but they say a catalogue settled account doesn't count, so what on earth can i settle in order to remove this negative? I have a redundant RBS account, should i close that? Would that count as settled?

Lenders like to see settled accounts - it shows that you can open, maintain a credit agreement well, and then close it. It shows a history of a good credit relationship, and you are more likely to do that with them (then say, default). In line with the rest of the advice on this post, remember that the CRA score is not seen by a lender, so don't let the tail wag the dog; do not make a personal financial change simply to move the indicative score given by a CRA. If you aren't using the RBS account, then close it, but it's not a biggie - you may find that in their own scores, many lenders will view a closed mail order as a settled account.

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

You don't have a "credit score". They do not exist. The number you are referring to is a a random number produced by the credit reference agency using incomplete data to make money out of you.

Different lenders score applications for different financial products differently so there is no 'catch all' score that determines your credit worthiness. Lenders use data from your credit file and also data from your application form that is NOT recorded on your credit file, such as your salary (a key driver), when assessing your application. Different lenders have different criteria, another reason a "credit score" means nothing -data that is considered good for one lender may be considered bad for another. Or vice versa.

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